SELLER CANCELS CONTRACT AFTER FAILING TO OBTAIN MARKETABLE TITLE WITHIN A REASONABLE TIME
The plaintiff-buyer initiated this action for specific performance and in the alternative, for damages based upon a sales contract involving Staten Island property. The contract of sale specified that the property was to be transferred as a legal one-family dwelling; however, the title search established that the certificate of occupancy for the property had not been issued. Approximately six months later, the seller canceled the contract and refunded the downpayment to the plaintiff's attorney. The plaintiff rejected the cancellation and returned the downpayment to the seller.
Defendant-seller moved to dismiss the complaint and cancel the lis pendens while the plaintiff-buyer requested that the court uphold the contract and title be transferred giving the buyer a credit of $4,500 which represented the cost of curing the legalization problem. The seller confirmed that he filed an application for legalization of the property as a one-family house but was awaiting confirmation from the Department of Buildings. It was the seller's position that since he was not able to transfer title to the property pursuant to the terms of the contract, the transaction could be canceled. Paragraph 6 of the rider to the contract stated that "Seller represents that the premises is being sold as a legal one-family dwelling." The contract also provided that the seller must cure defects if that can be accomplished within a reasonable period of time. Since the seller was unable to obtain a certificate of occupancy more than 18 months from his filing of the application, he was unable to cure a defect within a reasonable period of time and therefore he was entitled to cancel the contract. The buyer claimed that her architect and her husband both were advised by the Department of Buildings that a certificate of occupancy could easily be obtained if the proper forms were filed and inspections were allowed.
The first paragraph of the contract of sale provided that the contract will become null and void and downpayment would be returned to purchasers within seven business days if seller cannot obtain a clear and marketable title within a reasonable period. Paragraph 19 of the contract of sale provided that "if the seller is unable to transfer title to purchaser in accordance with this contract, seller's sole liability shall be to refund all money paid on account of this contract, plus all charges paid by purchasers for (1) examining the title (2) any appropriate additional searches and (3) survey and survey inspection charges. Upon such refund and payment, this contract shall be considered canceled and neither seller nor purchaser shall have any further rights against the other." The court indicated that the seller made a series of efforts to obtain a certificate of occupancy and attached documentation to their motion papers to confirm same. The court further determined that the contract of sale did not provide that the seller had an ongoing requirement to cure the condition once a reasonable time had past. When the seller was not able to obtain clear and marketable title within a reasonable time, he canceled the contract pursuant to its terms and returned the downpayment to plaintiff's attorney. The contract would therefore be deemed canceled despite the buyer's rejection of that cancellation and return payment. The buyer's contention that she was willing to take title to the property without a certificate of occupancy was contradicted by previous correspondence indicating the contrary. In addition, the plaintiff did not attach a copy of a mortgage commitment to show that she was ready, willing and able to close the transaction. As a result, the buyer's cross-motion for specific performance was denied, the contract was deemed canceled and the deposit monies were to be returned to the purchaser. McDowell v. SIFH Ltd., Supreme Court, Richmond County (NYLJ 10/30/2002)
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